Digital record keeping: Vendors react

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AccountingWEB’s consultant tax editor Rebecca Cave nearly caused an earthquake of anxiety with her recent article “Digital accounting records to be compulsory”.

Cave’s article reported on the revelation that under the auspices of Making Tax Digital, the government expects every business to keep its accounting records in digital form.

“Each business and landlord will have to use some form of accounting software which has a capability to communicate with HMRC’s systems,” wrote Cave. “However, moving to a commercial software package will mean extra costs and data transfer problems for many businesses who have created their own bespoke accounting software, or who rely on Excel spreadsheets.”

The user Ireallyshouldknowthis neatly summed up AccountingWEB members’ reactions: “Mr Gauke has got his head up his backside on this one, no doubt the hard lobbying from the software companies about how great all of this is paying off.”

This comment could be seen as indicative of the scepticism held by our members towards the initiative. But what are software companies saying and thinking about Making Tax Digital? We spoke to a few key players to find out.

Ed Molyneux, founder and CEO of FreeAgent:

“We believe HMRC’s tax digitisation agenda is encouragingly farsighted - it would have been far easier and less controversial to allow the status quo to continue indefinitely. But that’s not on the cards, and anyway it's simply unsustainable for HMRC.

“We must always remember the punishingly disproportionate cost of compliance for small businesses, not just in the obvious areas of fees and software costs but in the time taken to manage ledgers, spreadsheets and bits of paper. Handwritten ledger books, shoeboxes of invoices and home-made spreadsheets are simply not good enough, and should be consigned to the dustbin. And what is the cost in business failure of business owners with no idea about what's happening until their accountant pulls it all together once a year? Why, as an industry supposedly striving to help businesses succeed, do we defend this?

To read the rest of Ed's (and others) thoughts on Making Tax Digital, sign up for free or log-in. 

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@The assembled software giants.

Accountants on this forms are in the main small accountants dealing with small clients.

By small we mean, very small. Consultants with 12 sales invoices a year and perhaps 50 expense lines is a "normal" client, as is a landlord with a single let property.  It is farce to suggest such business must learn how to use complex software when a basic excel sheet will do just a good a job, if not much better when measured against the key metrics of time, cost and accuracy. 

Excel is a perfectly adequate accounting system for simple businesses, as are in some cases a pile of invoices, especially when there are only half a dozen.  I know software companies don't like it, but this is a fact. 

Its tried, tested, and above all works, including when and often in rural areas, where, the internet does not.  Not everyone lives in Central London, I cant even get a mobile phone signal in our village, and its hardly that rural.  Clients are interested in their business.   They do not go home excited about the prospect of spending the weekend learning to use some software, accounting and tax is very very boring to many. I appreciate it different in software land when people queue up for the latest version and get excited by marginal changes to functionality, but the vast majority of business people outside of software are not like this. 

It would be a different story if  discussing our more complex or large clients. I have plenty of clients who have a business big enough, that excel wont do.  They keep either desktop software (which often runs at much higher speed than cloud) or cloud software such as Xero.  But out of business choice, and business case, not compulsion.  For each client put on Xero for instance we end up with a full day session converting data, importing, setting up and training new use.  Sometimes this goes well, sometimes it ends (quite literally) in tears when the client simply cant get their head around it.   Converting from a good current method has a significant cost to a small business, which in itself may be more time than they would spend all year on their records, and in return end up with a system which takes more time to use than the old simple method.  Business people don't like having their time wasted due to a distant minister's latest fad. 

I don't think anyone has a problem with digital delivery of data to HMRC.  What we have a problem with is compulsion of record keeping in set manner for no real reason.  The WHY is not explained.  All HMRC should care about is out client paying the right about of tax, which is accountants jobs to ensure.  How we get there is quite frankly none of HMRC's business, and last time they tried to police this with the failed business record checks, they ended it with a bloody nose, as predicted by the peanut gallery on here. 

The ICAEW have stated several times, as recently as in the tax faculty's budget review issued today, that "While we support the move to digital, we have told the government at every available opportunity that the compulsory keeping of digital records is a step too far."

Accountants are not stupid, clients are not stupid.  We work together to minimse the administration burden. If cloud software was so magical, every single client I have, including landlords getting one payment a month from a letting agent would already be on it.  The reason is very simple: it does not benefit them. 

 

 

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They can say what they want, but for a small landlord in 2016, 2025, 2050 or 2075 - writing down your income and expenses on a paper or a spreadsheet is easier than subscribing to a package and having to learn how to use it when there is just no need. The ICAEW, ACCA, etc certainly seem to agree with me.

By the way, I write this as somebody who runs a practice with 90% of our 400+ small business clients using a variety of cloud bookkeeping packages.

Anyway, it's a huge opportunity for us small practices that want to embrace technology. Whether we like or not.

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Ed Molyneux should know better...

...as CEO of FreeAgent (software for small businesses?)

"...“I’ve particularly been dismayed by the comments from some accountants on AccountingWEB, who having failed to provide the appropriate leadership, guidance or training to their clients whom they profess to support, on the matter of setting up effective financial systems,"

Really!?! - the vast majority of small businesses (read the comments from the two respondents above) have very simple requirements for "effective financial systems". Quite often a spreadsheet prepared once a year is sufficient.

On this basis how can "...HMRC’s tax digitisation agenda...(be)...encouragingly farsighted..." ?

Come on Ed get a grip, perhaps you're so far removed from work at the coal face that you've lost sight of what actually happens and is needed?

 

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Legalised theft

Let's cut to the REAL reason for these proposals.  The more deadlines HMRC can build into the system, the more opportunities for charging penalties they create.   

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Obviously software vendors will like it

HMRC will like it.  Apart from the acceleration of tax payments, bye bye backdating of dividends and other OMB tax planning ruses that, lets face it, 99% of small firms do.

If you use software, they will know when all entries were made.

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Really, really disappointed...
...with those comments by the Xero and Freeagent bods. At least the Iris chap is honest enough to admit this is all going to be a burden and isn't trying to whitewash that away.

As for the other two, be honest and say that you're looking to make a killing. That I could respect. But camouflaging blatant self interest with banal talk of what an advanced G8 economy needs (didn't your teachers never tell you not to make unsubstantiated assertions dressed up as facts?) registers very highly on my contempt meter.

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Apologies, but...

@adam.arca - The bulk of the remarks attributed to me in this article were actually made during a presentation at our conference in early February where I was speaking in the context of a wider theme of UK productivity placing second last in the G8 (which is sadly a fact), and about the role technology in general, including the prospect of a digital tax system, could play in helping address that.

Congratulations to AccountingWeb on stoking the fires - good work!

Gary Turner
Managing Director, Xero
@garyturner

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Amended, Gary

garyturner wrote:

@adam.arca - The bulk of the remarks attributed to me in this article were actually made during a presentation at our conference in early February where I was speaking in the context of a wider theme of UK productivity placing second last in the G8 (which is sadly a fact), and about the role technology in general, including the prospect of a digital tax system, could play in helping address that.

Congratulations to AccountingWeb on stoking the fires - good work!

Gary Turner
Managing Director, Xero
@garyturner

Gary is right. The first two paragraphs were from Xerocon 2016. My apologies and I've amended the article to clearly reflect this. Apologies.

On another note, chaps, I understand this is an emotional issue. But the gentlemen in the article were brave enough to put themselves out there and respectfully volunteer their opinions. I expect that AccountingWEB's members will return the courtesy and if they disagree, they'll do so respectfully.

To everyone that's contributed so far, thank you for keeping it robust but respectful. Long may it continue.

Cheers,

Francois (Moderator)

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Stoking fires.

garyturner wrote:

Congratulations to AccountingWeb on stoking the fires - good work!

Gary Turneris up to them, not HMRC. 
Managing Director, Xero
@garyturner

 

I think this particular fire needs stoking.  The vast majority of small businesses and self employed are blissfully unaware of what is about to hit them. Why should anyone be forced to buy equipment. pay for internet access, and learn how to use software, just to make HMRC's job easier?  Why should anyone be forced to hand over their hard earned cash to companies such as yours to pay for something they don't want, don't need, but are being forced to pay for by HMRC?  

Taxpayer's are required to make a proper declaration of their taxable income once a year, but whether they do so electronically, on paper, or tattooed on the side of a cow should be up to them, not HMRC.  The next step will be all income paid direct to HMRC and they will hand out "pocket money", probably in the form of vouchers exchangeable for government approved products,to taxpayers. 

 

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Pocket money

Spot on. I have been saying this in jest but the more I think about it the more logical it is that this will be the eventual outcome. One big central receipts and payments system presumably somewhere on the "cloud" and HMRC decide how much tax they want to take and will pass on whatever is left over after deducting admin, processing and transaction fees. All dressed up in ensuring "everyone pays their fair share of tax".

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Gary, you're making my point for me

garyturner wrote:

@adam.arca - The bulk of the remarks attributed to me in this article were actually made during a presentation at our conference in early February where I was speaking in the context of a wider theme of UK productivity placing second last in the G8 (which is sadly a fact), and about the role technology in general, including the prospect of a digital tax system, could play in helping address that.

Congratulations to AccountingWeb on stoking the fires - good work!

Gary Turner
Managing Director, Xero
@garyturner

Firstly, Aweb didn't make clear that you weren't responding directly to a direct question from them on the issue of MTD. That's a bit naughty of them and I was perhaps a bit too hasty to pass a negative judgment on that basis.

However, you're really only making my point for me.

Whether we are 2nd bottom of the G8 or not may be a fact (I neither know nor care) but what is its relevance in this context?

By way of parallel, if I finish 24th out of 100 in an exam, would I be condemned for being 2nd bottom of the first quartile?

Also, how does imposing a one size fits all policy achieve an increase in productivity? Obviously, I haven't seen the detail of your address at this conference but nor have I seen it anywhere yet in the professional press. So be specific and be brave and above all be honest: why would MTD be better than what we have, why would the costs be justified, why isn't laissez faire on record-keeping good enough, do HMG and HMRC have a hidden agenda, why should we believe you, can you give us specific examples of how processes would be improved for even the smallest businesses with naff all transactions, can you explain why larger businesses who are happy with where they are at have to go through all that upheaval for no discernible benefit to themselves?

So, come on, let's have some chapter and verse rather than bland assertions.

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Deletion

Young Badenhorst quickly leapt over the English Channel to delete my comment.  About 2 minutes it took.

Just wanted to record that so no one thinks this is a pro-Gary fest

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That's fine

I'm not here to censor, just please keep it respectful. Play the ball, not the man. 

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Ad hominem

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Nailed it

AnnAccountant wrote:

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Yes, you're right: No ad hominem attacks. 

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There will be...
...I'd wager, many completely free, or very low cost and simple tools for people to use when it comes down to it. If the market opportunity is attractive enough for software companies to build them, of course.

And for clients who are better suited to paper or non digital systems, low cost mechanisms and services for the collation and compilation paper records for conversion to digital accounts will also be available, even if that means the job of compilation will happen at the accountant side of the process, which may incur a cost to the client. I would also point out that many practitioners are already using services like Receipt Bank for this very purpose.

Gary Turner
Managing Director, Xero
@garyturner

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Gary Gary Gary

garyturner wrote:
...even if that means the job of compilation will happen at the accountant side of the process, which may incur a cost to the client. I would also point out that many practitioners are already using services like Receipt Bank for this very purpose. Gary Turner Managing Director, Xero @garyturner

As you say Gary, this does add accountancy and software cost onto a small business.

So far, software companies one and all have been rubbing their hands with glee and have thrown their support behind this money making excercise.

Unlike the software companies, accountants have the integrity to say, yes we are in line to make more money from this, but enough is enough, this is not good for our clients, we do not want the extra work or money. And besides we at the coal face know this will not work in practice.

That is the bottom line.

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no

NH wrote:

garyturner wrote:
...even if that means the job of compilation will happen at the accountant side of the process, which may incur a cost to the client. I would also point out that many practitioners are already using services like Receipt Bank for this very purpose. Gary Turner Managing Director, Xero @garyturner

As you say Gary, this does add accountancy and software cost onto a small business.

So far, software companies one and all have been rubbing their hands with glee and have thrown their support behind this money making excercise.

Unlike the software companies, accountants have the integrity to say, yes we are in line to make more money from this, but enough is enough, this is not good for our clients, we do not want the extra work or money. And besides we at the coal face know this will not work in practice.

That is the bottom line.

As a relatively new upstart I have no shame in saying I want the additional work and fees

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New problem / new solutions.

I believe that whatever the final requirements are, software will evolve to suit that. Some of which will be free. I see your Microsoft Office and raise you Google Docs.

The accountant will have to deal with the non computer using client, but on the whole I don't think we will end up with as much of a car crash as is being predicted.

(Caveat - I am in industry though, with a couple of my own small businesses on top)

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back in the real world

tom123 wrote:

(Caveat - I am in industry though, with a couple of my own small businesses on top)

You are obviously someone that will not be fazed by this.  For those kind of businesses this will not be a problem, I have many clients like that.

However I am afraid in the real world of many small businesses it is difficult enough to get correct paperwork for them to file by the 31st Jan nevermind 4 times a year.  What we will end up doing is filing a load of nonsense for 3 of those quarters and then catching up with the real figures in the 4th.  Probably have to charge them twice as much as well.  Whats the point in that?

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I feel the fear

Morning NH - I am in the real world, honest! - it's just that, being a bit 'behind' the professional front line I don't have to panic too much.

I am genuinely interested in these developments however.

You can call me naive, of course, but if you take the once a year versus four times a year collection of records it could actually lead to a better spread of work etc - and more opportunities to train the client.

I do have a handful of SA clients, with shoeboxes of receipts, so am not completely academic over this.

 

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Sorry

tom123 wrote:

Morning NH - I am in the real world, honest! -

Sorry Tom, I didnt mean to offend.

Of course, I would love it if the work could be spread across the year instead of 25% of my turnover being in January, but those clients with the shoeboxes who run perfectly good businesses and provide much needed services to the public - why should they a) now have to pay more in accountancy fees and b) have the hassle of changing their method and frequency of reporting.

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None taken.

NH wrote:

tom123 wrote:

Morning NH - I am in the real world, honest! -

Sorry Tom, I didnt mean to offend.

Of course, I would love it if the work could be spread across the year instead of 25% of my turnover being in January, but those clients with the shoeboxes who run perfectly good businesses and provide much needed services to the public - why should they a) now have to pay more in accountancy fees and b) have the hassle of changing their method and frequency of reporting.

No offence taken NH - as I always say - we're all friends here. Hence my !. I must use a smiley face next time..

I agree about forcing unwanted computer skills on otherwise well run businesses. My clients, on the other hand, would themselves benefit if they managed to organise themselves a bit better.

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@adam.arca

It's not really my job to defend or explain the government's policies. I am a technology advocate by occupation by and my opinions are therefore likely to be informed and guided by that more than anything else.

And I have to say that the notion that software companies are somehow rubbing their hands, standing by waiting to make a buck on this is wearing pretty thin. I can see why we're an easy target for easy remarks about integrity, but the reality is things are not quite so simple.

Gary Turner
Managing Director, Xero
@garyturner

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Gary, you can't have it both ways

garyturner wrote:

It's not really my job to defend or explain the government's policies. I am a technology advocate by occupation ....

.... I can see why we're an easy target for easy remarks about integrity, but the reality is things are not quite so simple.

Gary Turner
Managing Director, Xero
@garyturner

Why aren't things so simple? What else is going on? Should I hazard  guess at HMG / HMRC agenda we're not supposed to know about? Do tell.

Anyway, that aside, you really can't have it both ways. If you want to retain the integrity you are accusing us (accountants) of saying you haven't got, then you have to come out and say:

EITHER

"Xero is software targeted at a tech-savvy audience. We would expect that to grow naturally over time anyway as young, more tech-adept people become self employed but that is going to be accelerated by compulsory digitisation. We don't agree with that compulsion but, given that we provide a service which meets the need for the government's desired direction of travel, we are obviously going to make hay whilst the sun shines because that is what being in business is about."

OR

"Xero believes that compulsory digitisation is the way to go because....[DETAILED EXPLANATION WITH NO BLAND ASSERTIONS FOLLOWS]" In which case, you would be explaining the government's policies.

 

But what you shouldn't do (IMHO anyway) is just sit on the government's coat-tails, gives us soundbites about the brave new world of MTD but then refuse to explain those soundbites in terms of impact / cost / reasonableness / proportionality etc.

 

Go on, be bold and nail your flag to the mast  :)

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Free offering?

garyturner wrote:
And I have to say that the notion that software companies are somehow rubbing their hands, standing by waiting to make a buck on this is wearing pretty thin. I can see why we're an easy target for easy remarks about integrity, but the reality is things are not quite so simple.
Whilst it is true to say you are an easy target, that does not mean you are not a legitimate target. You actually do stand to make money out of this government policy and it would be disingenuous to deny it.

If you really want to dispel this image (and this goes to all the other software providers out there) then commit to offering a free basic version of your software. There are many people filling out tax returns that are struggling to make ends meet already. Provide those people with the means to achieve compliance without cost, and you will prove you are not wanting to benefit from the struggling poor. At the same time, getting cost-conscious start-ups on your system early must make it more likely they'll move to your paid-for system once they expand. You can't buy PR like that.

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Gary, the facts are that the only people (as a group) I have seen that are 100% pro quarterly reporting are software companies and HMRC.

Everyone else in business seems to be against it for obvious reasons.

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Hackers?

What fertile ground this will be for hackers. Plant a virus and watch it spread to every business in Britain. 

Just how much do you trust HMRC's system security. 

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Too fast

Clearly RTI has far too many glitches - how about making that work before we move on to something else ?

Fair play to Gary Turner for coming on here to give us his view, though.  Not that I share them but I appreciate his input.

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@adam.arca
I've shared my opinion about the merit of digitising processes (including MTD) but nobody is forcing you to accept it. I may also be completely wrong (wouldn't be the first time), and I'm comfortable with that, too, and I'd be very happy to stand corrected if turns out to be the case.

I'm also confident that readers will be able to apply their own filter over whatever opinions are expressed on here, whether they come from digital advocates, small business owners, practitioners or whatever without requiring to hold them to some kind of public sworn statement of conflicting or otherwise interest.

Emotive topic, best I respect that and say no more.

Gary Turner
Managing Director, Xero
@garyturner

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Why not look at the benefits as well as the costs.

Here are my thoughts.  

 The next generation of businesses already think differently and will search differently for services eg they will type in Digital Tax Services or something similar.   They you tube everything. They just like knowing a bit about everything but still happy to get someone else to do it.  The change is already happening. In fact at 47 i do the same.

We have discussed this with most of our clients and it is not the backlash you expect but then my clients are all doing monthly accounts. 

   Businesses and self employed are not stupid.   More and more want to know the net profit daily and their balance sheet what they are owed or what they owe, daily -weekly- monthly and do not want hmrc fines 

There are a large amount of business that do not keep regular books and it will  be much better for businesses to have regular records maybe we would have less liquidations. 

The simple fact is none of my clients will start doing it themselves.   Successful  business's  will be getting on with what they do best in their business.  

The biggest issue for me is the costing for the digital scanning that will become competitive. 

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What happened to nudging?
It's nice to see some controversy in the industry that I've not instigated for a change : )

FWIW, I think it would have been far better for the treasury/HMRC to use incentives instead of legislation to get what they wanted. Some sort of tax break for those who have/do digitise their records.

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Remember PAYE incentives ?

Who else recalls that we had grants for doing PAYE filing on line when that system started ?  Back then we were actually encouraged, not bludgeoned.

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Excellent idea
Well said, Duane. Mandation appears to be the main issue people have a problem with - incentivising those that can and want to would be a much more sensible approach. I suspect, however, that might not suit Mr Osborne given the timeline the sitting PM has set for his stepping down.

Gary Turner
Managing Director, Xero
@garyturner

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working together?

I think the main problem is that although we as agents are the ones that will have to implement this, no consultation has taken place, HMG have not asked for opinion on the best way to introduce it, just a big announcement out of the blue.

Surely it would have been a good idea to bring the agents onside by asking them for opinion and listening to that opinion, it is after all the agent that knows the best way to "sell" this to clients.

For example the most obvious thing would be to firstly introduce it for VAT registered businesses for a year or two and let the system start working on a smaller scale.

Its a shame really that we cannot work together on this, but we all know about what happened to "Working Together".

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It feels like technology for technology's sake

Don't get me wrong, I'm no luddite.  I have personally been paperless for about 5 years now, my own practice bookkeeping has been on a cloud system for almost as long, around half of my clients are on the cloud to a greater or lesser extent and for the past 10 years I have filed things electronically where I possibly can.

But I have a great problem with what I hear coming from HMRC. It simply feels like technology for the sake of technology.

Like most of us on here, I have clients that quite happily and competently maintain their accounting records on a spreadsheet. Once a year they give that to me to prepare their company accounts or SA return. Corporation tax and income tax are calculated on an annual basis, so that works fine.

Why on earth do HMRC need to have quarterly or monthly reports (which will almost certainly be incomplete) when such taxes are calculated on an annual basis?

Why does there need (if it turns out to be the case) to be a photo album of invoices scanned in and uploaded, when there is almost certainly no one at HMRC who will ever look at them?

I'm all for encouraging businesses to use the cloud where appropriate (and indeed give them incentives for doing so, such as what happened with filing PAYE online some 10 years ago), but there are plenty of instances when it isn't the most efficient or effective solution, such as the micro trader, buy-to-letters or the standard annual tax return taxpayer.

I don't really understand what the benefit is to anyone of forcing technology onto a group of taxpayers, which only increases their costs and benefits no one (neither taxpayer or HMRC).

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Out of interest I googled -

Out of interest I googled "what records a business is required to keep", just as a new business might do and selected the HM Gov offering.  

https://www.gov.uk/government/uploads/system/uploads/attachment_data/fil...

No mention of any requirement to keep in digital format, Indeed it simply states - "The law does not say how you must keep your records. You need to keep some original documents which show that tax has been deducted. An example is form P60 End of Year Certificate for PAYE. We recommend that you keep all original documents you receive. Most records can be kept electronically (on a computer or any storage device such as disk, CD, memory stick or microfilm) as long as the method you use: • captures all the information on the document (front and back), and • allows the information to be presented to us in a readable format, if we need to see it."

The operative word in the above is CAN, not "MUST".  

I have no problem with encouragement to change, but every problem with compulsion.  

 

 

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Technological weakness

Any system is only as good as its weakest point. A look at the number of junk emails I get soon establishes that many arise as a result of some system somewhere being hacked and data stolen. The unwary opening of an attachment can soon unleash an attack. Sometimes with catastrophic effects. When that happens the cost can be such as to make recovery a non option. Loss of access to the internet is an ever present problem. It is not so long ago that an update from McAfee prevented many from accessing the internet, me included. Nowhere have I seen even the remotest acknowledgement that there could be real problems to making the system sufficiently robust to be totally relied upon. Speed can be a problem as well. In my town centre area we do not get fast broadband from BT and there no plans to upgrade us and yet just round the corner they are on ultra fast broadband.

When government has got the infrastructure right and the support right then is the time to consider implementing such solutions, not before. Let us not forget also that it is still not possible to carry out internet communications with HMRC, such as email or web chat. If they cannot implement such everyday communication methods why are we supposed to go beyond them in the use of technology. When they can answer a phone query within 5 minutes then is the time to say they have arrived somewhere where they expect us to be.

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43%

From the HMRC website, 43% of 2014-15 self-assessment tax returns were filed after 31 December 2015.

It seems self-evident to me that the vast majority of this 43% are miles away from either decent quarterly submissions or coughing up for software to file with HMRC.

From where I sit in the Lake District the existing supply of book-keepers and accountancy services are quite simply swamped by demand for our services.  This is largely due to the general incompetence of HMRC.  In my view 17 of my 142 clients would not need my services if HMRC operated to the same degree of professionalism they did in 1996.  With various changes they are planning HMRC make it clear they want a world where accountants pretty much do not exist and taxpayers are 100% DIY.

In essence the direction of travel of HMRC is to totally ignore the marketplace and ride rough-shod over the capabilities of 43% of taxpayers.  Like all attempts to buck the market this will end in tears.  None of them will be mine - that is my pure and simple goal for the next 3 years in dealing with this stupid stuff.

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That's an interesting statistic

mr. mischief wrote:

From the HMRC website, 43% of 2014-15 self-assessment tax returns were filed after 31 December 2015.

It seems self-evident to me that the vast majority of this 43% are miles away from either decent quarterly submissions or coughing up for software to file with HMRC.

From where I sit in the Lake District the existing supply of book-keepers and accountancy services are quite simply swamped by demand for our services.  This is largely due to the general incompetence of HMRC.  In my view 17 of my 142 clients would not need my services if HMRC operated to the same degree of professionalism they did in 1996.  With various changes they are planning HMRC make it clear they want a world where accountants pretty much do not exist and taxpayers are 100% DIY.

In essence the direction of travel of HMRC is to totally ignore the marketplace and ride rough-shod over the capabilities of 43% of taxpayers.  Like all attempts to buck the market this will end in tears.  None of them will be mine - that is my pure and simple goal for the next 3 years in dealing with this stupid stuff.

One of the big reasons that HMRC are giving for quarterly filing is that taxpayers want to know their tax liability sooner.

Obviously 43% are happy to wait at least 9 months to know their SA liability. I suspect the vast majority of the other 57% are filing more than 6 months after the end of the tax year, so they are not too bothered either.

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Small businesses

I do understand the implication that many small businesses will gain a benefit from more timely business information and, probably, from being pushed into doing business digitally.

However, how does that help 84 year old Aunt Ada, who gets rent of £500 a month, less 15% + VAT commission ?  What can software do for her ?  Give her monthly management accounts showing her profit is £410 ?  Or she could just look at the cheque she gets. (Or, if she's really clued up, her bank statements.)

There's a level below which software doesn't help.  It is always going to be quicker for me to work out how much the bookie owes me on my winning £10 bet at 5/1 than by using any app.

There are many people in the UK who are self employed, not because they ought to be, but because it's their best option.  Software holds nothing for them.

A small business is probably now defined for me as "a business with a finance director".  Below that there are micro businesses.   And below that, there are, believe it or not nano and pico businesses.  Maybe even femto and atto businesses.

All in it together ?  I think not ............

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When honesty possibly isn't the best option
in the same way that I only have clients that I like, do business with people that I trust, I also only purchas software and services from people or companies that I like. So thank you to Ed at FreeAgent for being so openly insulting and unprofessional to the accounting Industry, when there is so little difference between many of the cloud offerings finding out the true personality behind a company makes business decisions so much easier for us.

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Scale

Just to put some numbers on the scale - hopefully the software providers will take note - a company with a turnover of £10,000,000 is "small".

I have several clients around the £10,000 mark.

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Blimey, that was a busy weekend.  Thanks for Gary coming into the thread. 

For me the issue is very much compulsion at the smaller end, remember small means right down to anything over £1,000 profit as from April. 

And the fact it ought to be none of HMRC's business how records are kept, so long as they are kept.  To suggest accountants should be bundling off loads of data to the likes of receipt bank is odd when the data can sit in sometimes loft space for 6 years just as well given the chance of anyone looking at them is virtually nil.

I would say around 10-15% tops of my clients are truly 100% paperless at the moment.

My own office is mixture, and despite using Xero for my own office accounts I dont arse about scanning in paper receipts, they get slapped in a box file, and I put an elastic band around them once a year, its rarely more than half an inch thick and they are there if I need them.  Which invariably, I don't.  And i am a £175k+ turnover business, I just don't have many costs. 

Around 75% of my xero clients dont scan in and attach (routinely) their receipts but have paper systems despite my nagging, and the 25% than in theory attach miss a good 10% or more. 

That is to say, even my digital clients are not truly digital, and how on earth HMRC propose to police records even if they do decide everyone must go digital is quite another story. The simple answer is: they cant.  Even if they refuse to accept expenses with missing invoices, you would just load a load of generic PDF's with sometime like "receipt available on request" to fool the software.   

HMRC's last foray into digital detail was iXBRL tagging, which after several years operation is largely ignored by accountants in that no-one really cares what data is tagged by your accounts prep software with what tags so long as the thing files as there is no come back. HMRC are simply not looking at it. We send 'em detailed garbage, which is what I imagine they will get with quarterly reporting. 

 

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iXBRL, RTI

ireallyshouldknowthisbut wrote:

HMRC's last foray into digital detail was iXBRL tagging, which after several years operation is largely ignored by accountants in that no-one really cares what data is tagged by your accounts prep software with what tags so long as the thing files as there is no come back. HMRC are simply not looking at it. We send 'em detailed garbage, which is what I imagine they will get with quarterly reporting. 

With both iXBRL and RTI, the important thing seems to be sending something to HMRC on time.  

HMRC would be better working on their existing systems.

CIS is just a disgrace.  Taxpayers need to know how much of their money HMRC hold.  It's not really much to ask.

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There are always casualties in any change

lionofludesch's Aunt Ada above is a good example of this, as were small charities and voluntary organisations being forced to digitise their 2 person payrolls when RTI came on the scene, but, if the vast majority of businesses (and non businesses) are taking up every form of digital recording & communication available, without being forced to by the government, or anyone else, then, presumably, they see the benefits in it and the government would be more heavily criticised for not doing the same.

So we can all find examples of people who will be (and have always been) unlikely candidates for a change, but populating the above discussions just with these examples is unrepresentative of the debate.  Similarly, just because HMRC find it difficult to cope with stuff, doesn't mean the proposed changes are wrong.

Ed Molyneux's comments are on the button as far as I'm concerned, there are far too many people ready to dig up horror stories for such changes based upon the way they do things now, without the ability (or more likely willingness) to imagine that, just because it's always been done like that doesn't mean that, if the environment changes, we can't find another better way to do it.

So yes, it is fiddly to scan loads of documents to attach to a financial transaction but there are already facilities out there that make it almost painless.  I still come across accountants telling their clients to print out PDF bills sent to them by suppliers, to be stuck in a box file or worse, scanned into software.  As quickly as someone snaps a selfie for Instagram or their grand daughter, they can snap a train ticket or Tesco's receipt and let the system at the other end code it and generate a transaction for their books.  

Receipt bank costs me £9 a month, can nobody imagine that with potentially hundreds of thousands of new users needing such a facility, the number of apps won't expand and the costs reduce?

Similarly just because someone has always used a spreadsheet to keep their books doesn't mean that there won't be an app, or a simplified version of current Cloud accounting that will actually be easier and more efficient. Even 5 years ago when I had a load of spreadsheet clients who could never have coped with Sage & QB, they took to FreeAgent like ducks to a new pond, it was easier, more accurate AND it brought my fees down.

As John Lennon sang....I don't need to say it...do I?

 

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Bullied

Paul Scholes wrote:

lionofludesch's Aunt Ada above is a good example of this, as were small charities and voluntary organisations being forced to digitise their 2 person payrolls when RTI came on the scene, but, if the vast majority of businesses (and non businesses) are taking up every form of digital recording & communication available, without being forced to by the government, or anyone else, then, presumably, they see the benefits in it and the government would be more heavily criticised for not doing the same.

You can't draw any inference from CT600s, VAT and RTI.  Businesses are bullied into doing it that way.  It's ingenuous to say "everyone does it this way, it must be great."

SA ?  How many of these returns are filed by taxpayers and how many by agents ?

But, in any case, it's a huge leap from filling in an annual form to doing everything on line.

One minute we're asked for three line accounts, the next* HMRC want copies of every single transaction + plus a photo of the bill to back it up.

Unreal.

 

* OK - twenty years later.

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?

@Paul, "As John Lennon sang"

   'Yeah I'm the taxman' ? 

Gary Turner
Managing Director, Xero
@garyturner

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Wise guy!
Yeah but he didn't write it...ha!

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Unfair comments by Freeagent guy

I am quite disappointed by the Freeagent guy branding Aweb members (the people who sell and recommend your software) as moaning minnies.

The reason there is more passion and concern expressed by us is that most of us are sole traders so many of our clients are also very small so the changes are more significant than larger businesses who have internal resources to manage the changes. This is on the back of RTI and AE which have been difficult for most to deal with.

Most of my better clients get at least quarterly accounts so I don't see that there will be much of an issue for me to deal with them and I do see it as an opportunity for me personally.

I do however feel there should be a lower level it does not apply to, and that some sort of 3 line filing should be available for people to file rental income etc using HMRC tools as they do now without the need for commercial accounts software.

Its ok saying there will be free tools available for small operators to use but will there really be much appetite for the likes of Xero and Freeagent to develop free tools 

 

 

 

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